Delta Lloyd Cuts Size of Rights Offer to $715 Million to Placate Investors

By | February 24, 2016

Delta Lloyd NV surged as much as 12 percent in Amsterdam trading after the Dutch insurer bowed to investor pressure and cut the size of a rights offer to 650 million euros ($715 million).

“Following months of analysis, today’s announcement brings clarity to the amount of capital that we need to raise to reposition Delta Lloyd under Solvency II,” Chief Executive Officer Hans van der Noordaa said in a statement on Wednesday. “The group is performing strongly and producing good commercial and operational results. Our focus is to further improve our business and capital base.”

Delta Lloyd, the worst-performing stock on the Amsterdam Stock Exchange in the past year, announced in November that it aimed to raise as much as 1 billion euros in a rights offer to bolster capital to meet new regulatory standards. Some of the company’s largest shareholders were said to be dissatisfied with the insurer’s proposed rights offer and were considering voting against it in a March shareholder meeting, Dutch newspaper NRC Handelsblad reported last month.

The shares were up 5.3 percent at 5.34 euros at 9:45 a.m. in Amsterdam, giving Delta Lloyd a market value of about 1.22 billion euros.

‘Positive’ Tone

“The lower rights issue is clearly positive and will set the tone today,” JanWillem Knoll, an analyst at ABN AMRO Group NV with a buy rating on the stock, wrote in a note to clients. Lowering the size of the rights issue would imply an uplift of about 15 percent in ABN AMRO’s target price for the shares, he said.

The Amsterdam-based insurer also reported net income of 128 million euros for 2015, down 65 percent from last year, as swings in interest rates and credit spreads backfired and bonds declined.

The company has been under pressure to reassure investors as the European Union introduces stricter capital requirements for insurers in January under rules known as Solvency II. Delta Lloyd said its solvency ratio stood at 131 percent in 2015, while the rights offer and other steps planned by management will raise its solvency ratio to about 140 percent to 180 percent, the company said Wednesday.

Delta Lloyd also announced a plan to sell its 30 percent stake in private bank Van Lanschot NV this year.

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